NJR Doubles EPS in Second Quarter

New Jersey Resources reported fiscal third-quarter 2013 earnings adjusted for non-cash items of $0.23 per share, more than double adjusted EPS of $0.10 for the prior year period. The improvement was driven entirely by a swing from a net loss to positive earnings at the company’s energy services subsidiary, where colder weather and greater volatility in the natural gas market created margin opportunity for wholesale gas management.

The relative strength in wholesale results offset a modest decline in NJNG’s regulated earnings, as lost margin from volumes knocked out by Sandy damage and higher operating costs dropped quarterly earnings 27%. NJR tightened its earnings guidance range for the full year, from $2.65 to $2.75 per share from $2.60 to $2.75 per share, above our forecast of $2.61 per share for fiscal year 2013. We will revisit our expectations for the year, but will maintain our $39-pershare fair value estimate, our narrow economic moat rating, and our stable moat trend rating at this time.

While the fiscal third quarter typically has a minor impact on full-year results, management provided some more detailed guidance on regulated and renewable investments that will drive the company’s long-term 4% to 7% EPS growth guidance. The company’s five-year explicit forecast projects 4.5% annual growth in earnings, though NJR announced a new, $130 million regulated pipe project that could boost that number in tandem with an LNG liquefaction facility and renewable projects incremental to our forecast.

Management wouldn’t commit to firm targets for new asset development, but is more actively targeting wind projects to diversify away from its existing New Jersey solar portfolio.